When people talk about “digital transformation,” they frequently mean “digital modernization.” While these buzzwords sound synonymous and are often used interchangeably, it is important to recognize their key differences.
Modernization vs. transformation: what’s the difference?
Digital modernization is the adoption of new technology. It involves upgrading systems, platforms and software to meet today’s modern needs. It can be as simple as taking an existing paper process and making it electronic using new software and hardware, or more complex, such as phasing out existing infrastructure and equipment and moving to the cloud.
Digital transformation is more than digitization.
Digital transformation means taking advantage of innovative technology to reimagine an organization’s processes, culture, people and customer experiences. It can result in new business models, revenue streams, policies and values.
While digital modernization is focused on bringing an organization “up to speed” with the latest technology, digital transformation requires looking at the organization through a holistic lens and shaking up the business model to fundamentally change business performance.
Both digital modernization and digital transformation focus on using technology to improve business results, but it is important to understand that digital transformation is a bigger undertaking.
What is driving digital transformation and digital modernization?
Many companies are undertaking digital modernization due to a surge in “move to cloud” initiatives. Companies don’t want to move COBOL or Adobe ColdFusion apps from their data center to Azure or AWS without upgrading them first. The feeling—right or wrong—is that once the outdated technology is moved out of the data center and into the cloud, then it will stay on that technology forever. There’s no reason not to modernize after moving an application workload to the cloud, but it’s true that while you are already touching an application, you may as well update it to latest technology at the same time.
Additionally, a lot of CIOs and CTOs are looking to streamline their portfolio of vendors and technologies. As CIOs and CTOs become more empowered to be agents of change in the enterprise, they’re realizing that part of what has bogged down traditional IT organizations is relying on too many vendors spread across too many technologies. That complexity slows down the organization until no effective progress can be made due to too many dependencies.
Trying to keep up with industry evolution is driving digital transformation for many of today’s businesses. A shift in a company’s industry applies pressure for digital transformation at the very highest level. Banks, insurance companies, retailers, B2B manufacturing, consumer goods—almost every industry sees a dramatic shift coming or has already been through one, maybe even several.
“Convenience culture” is one of the biggest evolutions across multiple industries. The easier it is to shop, bank or do business with a company, the more likely it is that a consumer will return. For example, regional banks are seeing their core business shift as “born-digital” banks start to market the same services as traditional banks.
Get into the transformation mindset
An organization often dives into digital transformation because they are faced with growth opportunities in new markets, evolving customer behaviors and preferences, disruptive technologies, new regulations/compliance laws or competitive threats.
Before you begin, digital transformation requires taking a step back and asking two basic questions to help you drive the right changes in your organization:
- What does the customer really want?
- What business model is best for your organization’s future?
To address the changes required for transformation, you must prioritize the business needs first, and then figure out the cost and implementation strategy.
While a budget is necessary, try letting go of the belief that every project needs an ROI and see how that impacts your ability to think of creative solutions for your organization’s biggest pain points. Believing that every project needs to pay for itself as a measurement of success can unintentionally result in making decisions that do not fit the scope of transformation for the entire enterprise.
What does a successful digital transformation look like?
Customers are often at the center of digital transformation initiatives. For example, customers today expect major retailers to offer online shopping, shipping to their home and in-store pickup options. While Amazon paved the way for these types of services, monolithic retailers such as Walmart, have quickly scrambled to meet customer demands. Now Walmart has a mobile app, offers free two-day shipping without a membership, digitized its customer service, and revised its online return policies to be more competitive, all while maintaining low prices.
Another iconic brand, McDonald’s, has been undergoing a significant digital transformation over the past few years. Not only has the fast-food chain revamped its stores to have a modern aesthetic, but it has also installed digital menu boards and kiosks where customers can place orders themselves in an effort to improve accuracy and give customers more control. They have also rolled out a mobile app that allows customers to order ahead of time and opt in to its new mobile-driven loyalty program. And, keep up with “convenience culture” McDonald’s also partnered with Uber Eats to offer food delivery.
Behind the scenes of these digital transformation success stories are new technologies and huge changes to processes, culture and infrastructure. Undergoing digital transformation requires a willingness to invest time and money in changing the things your employees and customers have been comfortable with for years.
Establish a digital transformation team
Digital transformation is typically led by the CIO or CEO. It is key to have C-level leadership to champion a new way of working, encourage adoption among employees, and create a sense of urgency.
While CIO or CEO support is key, they don’t have to be the digital transformation expert. Establish a role (or a team) to be the keeper of an organization’s “digital vision.” This role should have a true understanding of the digital landscape to create a coherent and unified vision for the organization’s long-term digital transformation strategy.
You should also establish a task force composed of stakeholders representing various areas of the organization, such as HR, legal, marketing, sales and other disciplines. Because digital transformation results in cross-company changes, getting out of organizational silos and creating a cross-functional team helps ensure all perspectives are taken into consideration. This helps build a strategy that can be implemented successfully across the company with little resistance or error.
You can also bring in an experienced partner to collaborate on the massive amount of change a digital transformation is bound to include. An external expert can provide an outside vision of digital trends and emerging technologies. They can also provide examples of what has already worked well for similar businesses. An external expert, tempered by the internal expert, can guide the digital transformation team on a unique and customized path that meets the most pressing customer and business needs.
To transform, embrace perpetual change
While you should maintain a holistic view when undergoing digital transformation, it’s good to start small. Focus on a specific initiative to gain some traction and momentum.
Digital transformation is a perpetual journey. While you should develop a strategic roadmap for three, five, or even 10 years, it is important to be flexible and understand disruptive technology will most likely change that roadmap at any moment. Creating a culture that welcomes change enables an organization to be nimble, agile and able to turn on a dime in order to meet changing customer needs and expectations.